Artificial intelligence is entering many stages of business activities. AI can create content, analyze customer data, optimize advertising, reconcile documents, and receive customer requests. As technology takes on more and more jobs, businesses may want to shrink their staff or eliminate some positions. But buying software or putting AI into use does not by itself create the right to terminate an employment contract.
The Labor Code currently does not have separate criteria for AI.
According to Vietnamese labor law, AI is not a basis for terminating an independent contract. The legal basis must still be a change in structure and technology according to Article 42 and the direct consequences of such change on employment.
AI can lead to technological change, but it is not taken for granted
Clause 1, Article 42 of the Labor Code (Labor Code) 2019 identifies three cases of structural and technological changes: (i) changes in organizational structure or labor reorganization; (ii) changes in production and business processes, technologies, machinery and equipment associated with the employer's industries and trades; and (iii) changes in products or product structures.
This regulation does not limit technology to machines or tangible production lines. A software system, automation platform, or AI tool may be subject to process or technology change if the implementation substantially changes the way the business organizes and conducts business activities.
For example, AI can be a driver of technological change if it automates much of the planning, content production, and advertising optimization, forcing businesses to redesign their processes and management structures. Conversely, if AI only helps employees draft or analyze faster, and jobs and positions still exist, it will be difficult to conclude that workers have lost their jobs due to technological change.
The Labor Code currently does not have separate criteria for AI. Therefore, the problem does not lie in the name or the level of modernity of the tool, but in the provable impact of that tool on the process and the needs of the employer.
Task replacement AI may not have erased the location
This is an important difference between AI and many traditional machines. Machines can replace a production stage relatively completely, while AI often impacts each task in a job position first.
For example, the position of Marketing Director, not only writes content or analyzes data, but also builds strategy, manages budgets, and manages human resources. AI can reduce the time it takes to perform some tasks, but it is unlikely to eliminate the rest of the core functions.
Therefore, before assuming that a position is no longer necessary, businesses need to answer three questions.
Firstly, has the business process really changed or has the business just added a new tool? The change needs to be reflected in the workflow, organizational chart, scope of responsibility, and how resources are allocated after the application of AI.
Second, is the automated part of the job a core function of the location or just a support task group? Reducing part of the workload doesn't mean that the entire location becomes unnecessary.
Third, is the position really removed? If the business terminates the contract with the Marketing Director but shortly afterwards recruits the "Head of Growth" to perform most of the old tasks, this may be a sign that the business is just changing people or changing the name of the title.
A general decision that "due to the application of AI, there is no longer a need to use workers" is not enough. Records must show the status before and after the change, the tasks are automated, and the reason why the workers cannot be continued.
AI cannot be used to handle the problem of personal capacity
Article 42 of the Labor Code regulates the consequences of employment arising from objective changes at the organizational level. This is not a mechanism to handle an individual's failure to meet job requirements.
If the position still exists but the employee does not know how to use the new tool, does not meet the target or does not adapt to the digital transformation process, the problem is essentially the ability to complete the job. At that time, if the enterprise chooses to unilaterally terminate the contract because the employee regularly fails to complete the job, the enterprise must meet the conditions at Point a, Clause 1, Article 36 of the Labor Code if there is a regulation on assessing the level of work completion issued in accordance with regulations and there are sufficient documents proving that the employee regularly fails to complete the work.
Conversely, if the worker is still doing a good job but their position is actually eliminated because the new process no longer needs that function, the new Article 42 can be considered.
This distinction is especially important when only one person is affected. Internal emails or minutes expressing dissatisfaction with the individual employee may conflict with the official reason for the change in technology. When a dispute arises, the dispute resolution body can consider the nature and process of the decision formation, rather than relying solely on the name used by the business.
When only one worker is affected
Clause 3, Article 42 of the Labor Code stipulates that when a change in structure or technology affects the employment of "many employees", the employer must develop and implement a labor use plan according to Article 44. In addition to the mandatory scope of this regulation, the consideration of retraining is still a measure to help enterprises prove that the decision to dismiss is only made after the plans to continue employing employees are not feasible.
However, the law has not determined how many people are considered "many" and has not clearly stipulated the mechanism applied when changing technology only loses one person's job. Official Letter No. 9973/SNV-LDTLBHXH dated 4-6-2026 of the Department of Home Affairs of Ho Chi Minh City. Ho Chi Minh City[1] guides the dossier and method of notification for enterprises in the case of developing and implementing a labor use plan, but does not explain the threshold of "many employees".
Therefore, it is necessary to distinguish statutory obligations from risk management measures. The mandatory development of an employment plan when only one person is affected can still have different interpretations. However, businesses should not ignore the impact assessment and the possibility of arranging new jobs.
The prudent direction is that the enterprise still prepares an employment plan or at least one dossier with equivalent content. This dossier should record the reason for the change in technology, the affected position, the work that can be arranged, the possibility of retraining, and the reason for dismissal. This is both the basis of internal management and evidence that the decision is not aimed at removing a specific individual.
Procedures must be carried out before the termination of the labor relationship.
The sequence must be completed prior to termination
When it is necessary to develop a plan for the use of labor, the enterprise must discuss with the representative organization of employees at the grassroots level in the place where the organization of which the affected employee is a member. The plan must contain the contents according to Article 44 of the Labor Code and be publicly announced within 15 days from the date of approval.
Enterprises must also organize dialogues at the workplace according to Article 63 of the Labor Code and the provisions of Decree 145/2020/ND-CP. The dismissal of employees under Article 42 shall only be carried out after having discussed with the employee representative organization in case prescribed by law and notifying the provincial-level People's Committee and employees 30 days in advance.
This 30-day period is a separate procedure in the case of dismissal under Article 42, not the notice period of the right to unilaterally terminate the contract in Article 36. Therefore, enterprises should not mix two grounds in the same decision or use the form of unilateral termination of the contract in case of technological change.
Procedures must be carried out before the termination of the labor relationship. The formulation of additional plans, the organization of dialogues or the sending of notices after the employees have quit their jobs is difficult to remedy the violations that have occurred.
Job loss benefits and legal risks
Employees who have worked regularly for full 12 months and lost their jobs due to changes in structure or technology are entitled to unemployment allowances according to Article 47 of the Labor Code. The allowance calculation period is the total time the employee has actually worked, after deducting the time of participating in unemployment insurance and the time for which the severance allowance or job loss allowance has been paid. For each year within the allowance calculation period, the employee is paid one month's salary; the payment level is at least equal to two months' salary in case prescribed by law.
In addition, enterprises must also pay unused salaries, annual leave and other benefits under contracts, collective labor agreements or committed policies.
If the enterprise fails to prove the technological change or does not comply with the statutory procedure, the decision to terminate the employee is at risk of being determined as an illegal termination of the labor contract. Depending on the way the dispute relationship is determined and the employee's request, the enterprise may have to accept the employee back, pay salary and insurance premiums for the time they are not allowed to work, and corresponding compensation according to the Labor Code.
In cases where the basis of Article 42 of the Labor Code is not stable, the agreement to terminate the contract under Clause 3 of Article 34 is usually a less risky option. However, the consent of the employee must be completely voluntary; the agreement should not be used to conceal pressure or a predetermined termination decision.
Technology cannot replace legal basis
Businesses have the right to innovate technology and reorganize business activities. But that administrative right does not mean the right to let employees quit their jobs just by associating HR decisions with the phrase "AI application".
AI can only become part of the grounds for termination when it substantially changes the labor process or organization, makes the job position no longer exist and the business has considered the possibility of continuing to employ the worker. This decision must be supported by the process, data, and records created before the dismissal.
So the decisive question is not how much AI can do, but what position is really no longer needed after the application of AI. If AI is just a new name for a pre-existing replacement decision, technology will not help businesses avoid liability .
Lawyer Nguyen Van Phuc
HM&P Law Firm
